Inflating​ ​Away​ ​Our​ ​Technological Gains​

in technology •  2 months ago

[Originally published in the Front Range Voluntaryist, article by James Butcher]

Imagine being alive at the dawn of the industrial revolution, when mass produced food and textiles suddenly granted hours, or even days, of pure leisure every week for the average person. Imagine the explosion of steam power revolutionizing locomotion and thus connecting vast distances by rail to suddenly allow titanic quantities of goods and people to move across the continents. Imagine the Home Insurance Building, the world’s first skyscraper, being built, suddenly tapping into another entire spatial dimension for living space. Imagine witnessing (most of us have) the internet revolution, with ramifications too staggering to even mention in one paragraph. Imagine living through the scientific breakthroughs that forever changed our view of the world: the theory of gravity, the theory of evolution, the discovery of other planets, stars, and galaxies, atomic theory, the theory of relativity, quantum theory, and hundreds of others. These are true paradigm shifts. These are the revolutions in human progress that marked milestones in our history ever since the enlightenment.

What revolutions have occurred since the advent of the internet? Was the smartphone a revolution? Perhaps. The discovery of the Higgs Boson? Not really. 3D TV? No way. Although these are all great improvements and are highly commendable, they are not revolutionary. They are simply improvements and continuations and new spins on the most recent paradigm. Over the course of the past several years, even these relatively minor improvements have come fewer and further-between. How impressive is a slightly larger smartphone screen, slightly better visual graphics, a slightly sleeker car? Even Moore’s law seems to have ground to a halt.

This law, which was once very accurate for several decades, predicted that computer processor capacity would double every two years. This brought the cost of computers down tremendously to the point where a Pi Zero board costing $5 today has more computing power than a 1977 Cray Supercomputer which cost more than a million times that. Today, the cost of computing technology has actually been increasing in ways. Note how the cost of an iPhone increases significantly with each new release for little benefit. The same goes for nearly every other good and service in the world. Cars, homes, food, clothes, utilities, entertainment, travel, and recreation have all been getting more expensive while hardly improving at all.

What could account for this disappointing outcome? For science fiction nerds like me who are obsessed with limitless progress and achievement, we could never accept this trend passively, let alone welcome it. There must be an answer. Could we simply have reached the limit of what is possible? No. Prophecies about a “limit” have been declared and proven wrong countless times in history. Could we have reached the limit of available resources? No. There are still vast expanses of material, both concrete and abstract, in the earth and in the minds of billions of people.

Could we have reached the limit of available energy to use? No. Along with great reserves of fossil and nuclear fuels, we still live directly under a deluge of vast untapped energy from the sun, which pours about 1000 Watts per square meter over the entire surface of the earth. Could people have simply become satisfied with their condition and would rather live out the rest of their lives exactly as they do now with no more change for the better? To ask that question is to answer it. People always want to improve their condition, notwithstanding all the talk about a sustainable future, a ludicrous dream where a sustainable (fixed) population lives out eternity doing the same thing, using the same technology, century after century. Even the most hard-core proponents of sustainability want some kind of advancement in art, technology, or wealth. Why has it stagnated?

The culprit is, of course, the state. Taxes, regulations, confiscation, and monopoly privileges have always been the scourge of progress. However, the worldwide experiment in constant inflation bears special note. The explicit goal of central bankers is to cause an increase in prices of about 2% per year in order to fight the threat of deflation. While taking an extremely simple approach to the actual economics of the matter, let’s imagine a world where falling prices of everyday goods reigned, as it did during those past times of great progress. If the supply of money stayed constant, people would be able to acquire everything they needed to sustain their standard of living with money left over. What would they spend that extra money on? After putting some of it toward extra consumption, the rest would go toward savings. No longer simply maintaining the status quo, that extra money could fund the production of more machines to increase output for less cost, or fund research and development on even more efficient machines and methods of production.

Eventually, with enough savings, new technology could be tried. This does not happen automatically. The cutting edge is expensive. This is where much of the money goes when it is freed from the task of maintaining the old ways. It does not disappear into hoards. It gets put to work blazing the trail of progress.

If the prices of goods and services never come down, how will people ever have enough saved to scale up the cutting edge to its full potential (solar panels, desalinization plants, fiber-optic cable, etc.) or to finally develop the large shelf of inventions already made and developed and even prototyped to a large degree (driver-less cars, augmented reality gear, genetic engineering, etc.), or to experiment with speculative new technologies (quantum computing, full-immersion virtual reality, cure for cancer and aging, etc.)? As a rule, new inventions do not deliver on their promise for increased output until after a great deal of time and effort. They may even end up being failures. Research, development, and initial capital production are extremely costly. We cannot hope to succeed in these bold pursuits if we are stuck struggling to get by on what we have now.

In theory, some particularly fanatic people could cut back significantly on consumption in order to stockpile some savings, which could then be used for the purposes outlined above. But if enough people did this, enough to have any economic impact, they would be met with increased monetary intervention to prevent the resulting fall in prices. The thrifty would be punished while the extravagant would be rewarded, and the attempt would be thwarted.

But the situation is even worse. If prices never come down, but instead rise steadily (albeit slowly,) outpacing the increase in wages, all we would ever do is thoughtlessly adjust more and more to the hard times. We must simply grin and bear it as we tighten our belts, year after year, decade after decade, stoically dismantling our standard of living, until we reach bare subsistence. It would be a strange form of subsistence where we would all be living hand to mouth as in some Dickinson novel, but with the same gadgets used today. We would still travel by car, and still use smartphones, and understand that the earth is round and the sun is the center of the solar system; but, like the dark ages, life would never get any better. Only a new app, a new update to an age-old program, a new “feature” on our smartphone, a new coffee flavor at Starbucks, would dazzle us with novelty similar to how the earth-shattering industrial paradigm shifts of ages past once used to.

As I describe this nightmare, the realization that it is already descending upon us becomes apparent. There are no savings, only tremendous debt. The Hyperloop, strong AI, humanoid robots, space tourism, and other breakthroughs “just around the corner” are nothing but hype. These achievements could move ever further into the future as we focus ever more on just getting the bills paid this month. But this dark scenario is not inevitable. All economic depressions and all inflationary currencies in the past ended one way or another. I am confident that the human spirit of progress will be unleashed once more as soon as this failing experiment called statism is finally scrapped.

Most people do not yet realize how much progress has slowed. They are still dazzled by the “breakthroughs” of recent years. Yet many of these are merely symptoms of increasing poverty, which have only become widespread through necessity: Netflix, Amazon, automated service, teleconferencing, etc. Once people finally wake up to how little has truly changed, and take a big step back, and realize that true revolutions in human thought and wealth have merely become something our kids learn about in textbooks, they will ask “why?” too. We must teach them that it is not due to lack of possibility, nor resources, nor energy, nor motive, nor inflation; but lack of freedom.

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Completely disagree. Inflation is not offering but deflation. Things are not going up in price contrary to the popular mantra. The last decade saw so much of the world wide economy start to fall under the laws of IT that the central banks had no choice but to throw money at the problem. At present, the central banks are still putting $200B a month into the economy. Without it, you would see the economy collapse along with prices.

Just look at what took place a decade or two ago:

How much is your long distance bill? Remember them?
How many minutes on your cell phone plan? How many texts? Oh they are unlimited?
Remember $100 per barrel oil? How about $140? Now, with an expanding economy, oil cant get over $60.
How much did it cost to rent 3 movies for a weekend at Blockbuster? More than your Netflix costs a month.
Do you spend $250 on your tax return if you are a W2 employee? Most use turbo tax...$80.
Do you remember the days of trading in a car at 50,000 because it would be dead at 100K? I do. Now 200K is nothing for a car.
How much do you spend getting your pictures developed? Zero these days...it was a lot more at the turn of the century.

At present, the US economy has a 3/4 of a percent deflationary pressure on it due to the laws of informational technology. As tech expands this will grow. This is something few are paying attention to. The Fed is doing all it can to get inflation. It dumped trillions into banks and got nothing. Ask yourself why that is?

By the way, the areas that are still inflating, medical being one of the main ones, is due to monopolies and government intervention. Nevertheless, the longer these entities remain in place, the more powerful their destruction when technology does eventually break through.

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Inflation by definition is an expansion in the money supply. Its effect on prices is not simultaneous nor proportionate, but works its way through the economy over time. Nonetheless it redistributes property from the early receivers to the late receivers.

There is simply no need for a central bank to expand the supply of money. There is no "threat of deflation", as mainstream economic phobia teaches. Ideally, all prices are falling as the amount of goods and services provided outpaces the production of money. This is virtually impossible under an inflationist central bank.

Without it, you would see the economy collapse along with prices.

To the contrary: their policies are the precise cause of the business cycle, which assures that there's another one coming in the future. It would be best for the central bank to stop inflating immediately.

And besides, prices (of assets) are rising. Stocks, bonds, housing, etc., have all risen greatly. The state's policies, whether inflation or taxation, affect relative growth and progress. They mean decline.

Are you suggesting that since tech prices are falling that this is "bad" for the economy, and that the government isn't inflating enough?